Common use of Basis of Accounting Clause in Contracts

Basis of Accounting. The methodology and timing of when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Refer to Accrual Basis, Modified Accrual Basis, and Cash Basis. Cash Basis: A basis for accounting whereby revenues are recorded only when received and expenses are recorded only when paid, without regard to the period in which they were earned or incurred. Cash Flow: Cash receipts minus cash disbursements from a given operation or fund for a given period of time. Changes in Net Position: The difference between the net balance from one accounting period to the next. Consultant: An independent individual or entity contracting with an agency to perform a personal service or render an opinion or recommendation according to the consultant’s methods and without being subject to the control of the agency except as to the result of the work. The agency monitors progress under the contract and authorizes payment. Current Assets: Resources that are available, or can readily be made available, to meet the cost of operations or to pay current liabilities. Current Liabilities: Obligations that are payable within one year from current assets or current resources. Current Ratio: A financial ratio that measures whether or not an organization has enough resources to pay its debts over the next 12 months. It compares a firm’s current assets to its current liabilities and is expressed as follows: current ratio = current assets divided by current liabilities. Debt: An obligation resulting from the borrowing of money or from the purchase of goods and services. Debts include bonds, accounts payable, and other liabilities. Refer to Bonds Payable, Accounts Payable, Liabilities, Long‐Term Obligations, and General Long‐Term Obligations.